Live Research Bulletin: How are governments greening national accounts in Latin America? (Part I)

Development RoastBy Adam Nelson and Allan Spessoto

“…Gross national product … counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage….Yet [it] does not allow for the health of our children, the quality of their education, or the joy of their play.”

Robert F. Kennedy Address, University of Kansas, Lawrence, Kansas, March 18, 1968

It has long been established that the way that national wealth is calculated is a poor measure of development. Gross and Net Domestic Products (GDP and NDP) positively count only the production of material goods, including weapons, cigarettes and handcuffs, but do not count some of the positive aspects of society like poetry, relationships, and music. Nor does it deduct ‘progress’ when the health of the environment, human beings or animals is negatively affected at the hand of pollution and toxic industries. Or give credit to ecosystems for the services they provide to nourish people and planet, like the rainforest’s capacity to purify air, stabilize soils and nutrients, curb global warming, and provide food, shelter, and cultural sustenance to millions of people. For many, such deductions and credits would mean having to put a dollar value on things in life that are just too sacred to be commoditized. For others, such a value is the first step to making them visible, and thus making them count, when they were taken for granted before. Throughout the month of November, Development Roast has shared with you a series of INESAD Live Research updates on how whole nations are rallying behind the call for green growth by trying to integrate the environment in national accounting calculations. Today, we start with the first of a two-part update on Latin America.

The 1993 United Nations (UN) System of Environmental-Economic Accounts (SEEA) framework attempts to integrate environmental and economic statistics in order to assess the sustainability of economic growth and performance. It compares and brings together data of existence, use and flows of national natural resources of energy, water, land, and ecosystems and investigates how they relate to different sectors of the economy, such as agriculture, transportation, and mining. The end goal is to create sustainability indicators to help governments more sustainably manage national resources.

Latin America has seen limited experiences with SEEAor other related environmental accounting initiatives that shall be collectively referred to as “green accounts”when compared to other continents. A 1997 study by Chilean economist Marcel Claude shows that by the mid-nineties, many Latin American countries had plans or even pilot projects to implement green accounting. However, its development wasn’t a high priority for local or national governments, thus little funding was channelled towards it and many countries lacked even the most basic datalike physical measures of oil reserves and forest area or proper statistics on soil erosion and water contaminationneeded to start compiling the accounts, a problem that still persists.

A 2005 research paper by the UN Economic Commission for Latin American and the Caribbean (ECLAC) showed that although the continent had experienced an experimental boom with green accounting by 2004, few of the projects sustained. Since the revised UN SEEA manual was released in 2003, the two countries that made the most progress with national-level implementation of the SEEA have been Mexico and Colombia (see table below) and the results have been revealing. A 2010 report by the Mexican statistics institute (INEGI), for example, calculated that the 2008 economic cost of its environmental degradationincluding soil erosion, decreased stocks of oil, forests, and underground water, and air, soil, and water contamination, was equivalent to 7.9 percent of its GDP, with atmospheric contamination being the highest contributor to the cost (4.9 percent). In other words, if environmental degradation was to be compensated for (e.g. by taxing pollutors), it would reduce Mexico’s GDP significantly and affect its economy strongly. For Colombia, the different accounts include physical measures of stocks (e.g. metric tons of iron) and use of resources, and also expenditure on environmental protection. However, the Colombian accounts are provisional, and so far include very limited calculation of monetary costs of degradation.

Although Chile has ceased broad implementation of environmental accounting, the following case showed to be revealing. The Chilean economy rests predominately on the exploitation and exportation of natural resources from mining and forestry industries. A study conducted by the Government of Chile’s Department of Economics and National Center for the Environment (CENMA) took into consideration the depreciation of natural resources and the degradation of the environment into the costs of exploiting non-renewable resources. It found that Chile’s traditional National Account System (NAS), GDP, and NDP measures have overestimated the income generated by Chile’s mining sector by 31 to 36 percent. This results in the inability to rely on future projections of resources, intrinsic to sustainable development models. Although these accounts clearly demonstrate the need to examine and change how private businesses appropriate ‘free’ public natural goods like trees and contaminate others like air, currently there have been no adjustments to Chile’s national accounts as a result of these findings or policies put in place to make industries more financially accountable for resource use and contamination.

Where there is a dearth of government resources, international organizations, universities and independent research institutions often fill the gap. Check back next week for part two of the live research update on the green accounting experiences of Latin America that look specifically at the lessons such private efforts teach us about making the environment count.

Adapted from: http://www.eclac.org/deype/publicaciones/xml/7/35577/LCL3003e.pdf

 

Do you think more Latin American countries should adopt SEEA guidelines for environmental-economic development? Leave a reply below.

Adam Nelson and Allan Spessoto are Research & Communications interns at the Institute for Advanced Development Studies (INESAD)

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